Digital investor Michael Novogratz’s company Galaxy Digital officially announced that it will no longer be buying institutional digital assets platform BitGo as of Monday, August 15th.
A spokesperson for Galaxy stated that the crypto custody company failed to meet the July 31st deadline to submit the required audited financial statements to finalize the purchase.
Despite this, Galaxy is still set to formally list its shares on the tech-centric Nasdaq index as planned.
As of press time, BitGo executives have yet to comment on the issue.
A Promising Deal Hit by Setbacks
This is the latest setback for a deal worth around $1.2 billion in cash and stocks when it was originally announced in May last year and was expected to close by the end of 2021.
At the time, Novogratz was optimistic that the acquisition of BitGo would transform Galaxy Digital into an institutional hub for digital asset ecosystems and blockchain technology.
The purchase of a crypto custody firm was meant to be a key milestone in Galaxy’s thrust to become a prime cryptocurrency brokerage firm. It would have also brought in around 400 new clients through the crypto custody specialist.
However, in March of this year, the deal was derailed as approval of Galaxy Digital’s plan to be reorganized as a Delaware-based company remained pending with the US Securities and Exchange Commission.
The terms of the acquisition were also revised due to a recent decline in the price of Galaxy shares being traded on the Toronto stock exchange, which would give those investing in BitGo a more substantial stake in the merged entity.
Under the revised agreement, BitGo shareholders are expected to receive 44.8 newly-issued Galaxy shares as opposed to 33.8 million in the previous draft. This meant that BitGo shareholders would own 12% of the merged entity rather than just 10%. However, the document retained the $265 million in cash considerations.
Since then, Galaxy’s stock value has fallen by an additional 60%.
A Rough Couple of Weeks
Galaxy Digital got August off to a rough start. On August 8th, the company reported a net loss of $554.7 million as of the end of the second quarter, around thrice as much as it lost for the same period in 2021.
This more substantial loss is seen as the result of the recent downturn in the cryptocurrency sector.
As of the end of the first half of the year, Galaxy Digital held a liquidity position of $1.5 billion. Partners capital as of June 30th was up by 23% from last year, settling at $1.8 billion.